Cooperative

Overview

A cooperative (also known as co-operative, coöperative, co-op, or coop) is "an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically-controlled enterprise". Cooperatives are democratically controlled by their members, with each member having one vote in electing the board of directors. They differ from collectives in that they are generally built from the bottom-up, rather than the top-down. Cooperatives may include:

Worker cooperatives: businesses owned and managed by the people who work there Consumer cooperatives: businesses owned and managed by the people who consume goods and/or services provided by the cooperative Producer cooperatives: businesses where producers pool their output for their common benefit (such as agricultural cooperatives) Purchasing cooperatives where members pool their purchasing power Multi-stakeholder or hybrid cooperatives that share ownership between different stakeholder groups. For example, care cooperatives where ownership is shared between both care-givers and receivers. Stakeholders might also include non-profits or investors. Second- and third-tier cooperatives whose members are other cooperatives Platform cooperatives that use a cooperatively owned and governed website, mobile app or a protocol to facilitate the sale of goods and services. Research published by the Worldwatch Institute found that in 2012 approximately one billion people in 96 countries had become members of at least one cooperative. The turnover of the largest three hundred cooperatives in the world reached $2.2 trillion. Worker cooperatives are typically more productive and economically resilient than many other forms of enterprise, with twice the number of co-operatives (80%) surviving their first five years compared with other business ownership models (44%) according to data from United Kingdom. The largest worker owned cooperative in the world, the Mondragon Corporation (founded by Catholic priest José María Arizmendiarrieta), has been in continuous operation since 1956. Cooperatives frequently have social goals, which they aim to accomplish by investing a proportion of trading profits back into their communities. As an example of this, in 2013, retail co-operatives in the UK invested 6.9% of their pre-tax profits in the communities in which they trade, compared to 2.4% for rival supermarkets. Since 2002, cooperatives have been distinguishable on the Internet through the use of a .coop domain. In 2014, the International Cooperative Alliance (ICA) introduced the Cooperative Marque, meaning ICA cooperatives and WOCCU credit unions can also be identified through a coop ethical consumerism label.

Origins and history

Cooperation dates back as far as human beings have been organizing for mutual benefits. Tribes were organized as cooperative structures, allocating jobs and resources among each other, only trading with the external communities. In alpine environments, trade could only be maintained in organized cooperatives to achieve a useful condition of artificial roads such as Viamala in 1472. Pre-industrial Europe is home to the first cooperatives from an industrial context. The roots of the cooperative movement can be traced to multiple influences and extend worldwide. In the English-speaking world, post-feudal forms of cooperation between workers and owners that are expressed today as "profit sharing" and "surplus sharing" arrangements existed as far back as 1795. The key ideological influence on the Anglosphere branch of the cooperative movement, however, was a rejection of the charity principles that underpinned welfare reforms when the British government radically revised its Poor Laws in 1834. As both state and church institutions began to routinely distinguish between the 'deserving' and 'undeserving' poor, a movement of friendly societies grew throughout the British Empire based on the principle of mutuality, committed to self-help in the welfare of working people.

In 1761, the Fenwick Weavers' Society was formed in Fenwick, East Ayrshire, Scotland to sell discounted oatmeal to local workers. Its services expanded to include assistance with savings and loans, emigration and education. In 1810, Welsh social reformer Robert Owen, from Newtown in mid-Wales, and his partners purchased the New Lanark mill from Owen's father-in-law, David Dale, and proceeded to introduce better labour standards, including discounted retail shops where profits were passed on to his employees. Owen left New Lanark to pursue other forms of cooperative organization and develop coop ideas through writing and lecture. Cooperative communities were set up in Glasgow, Indiana; and Hampshire, although ultimately unsuccessful. In 1828, William King set up a newspaper, The Cooperator, to promote Owen's thinking, having already set up a cooperative store in Brighton. Also in 1810, Rev. Henry Duncan of the Ruthwell Presbyterian Church in Dumfriesshire, Scotland founded a friendly society to create a cooperative depository institution at which his poorest parishioners could hold savings accounts accruing interest for sickness and old-age, which was the first established savings bank that would be merged into the Trustee Savings Bank between 1970 and 1985. The Rochdale Society of Equitable Pioneers, founded in 1844, is usually considered the first successful cooperative enterprise, used as a model for modern coops, following the 'Rochdale Principles'. A group of 28 weavers and other artisans in Rochdale, England set up the society to open their own store selling food items they could not otherwise afford. Within ten years there were over a thousand cooperative societies in the United Kingdom.

Spolok Gazdovský [The Association of Administrators, or The Association of Farmers] founded in 1845 by Samuel Jurkovič, was the first cooperative in Europe (credit union). The cooperative provided a cheap loan from funds generated by regular savings for members of the cooperative. Members of cooperative had to commit to a moral life and had to plant two trees in a public place every year. Despite the short duration of its existence, until 1851, it thus formed the basis of the cooperative movement in Slovakia. Slovak national thinker Ľudovít Štúr said about the association: "We would very much like such excellent constitutions to be established throughout our region. They would help to rescue people from evil and misery. A beautiful, great idea, a beautiful excellent constitution!" Other events such as the founding of a friendly society by the Tolpuddle Martyrs in 1832 were key occasions in the creation of organized labor and consumer movements. Friendly Societies established forums through which one member, one vote was practiced in organisation decision-making. The principles challenged the idea that a person should be an owner of property before being granted a political voice. Throughout the second half of the nineteenth century (and then repeatedly every twenty years or so) there was a surge in the number of cooperative organisations, both in commercial practice and civil society, operating to advance democracy and universal suffrage as a political principle. Friendly Societies and consumer cooperatives became the dominant form of organization among working people in Anglosphere industrial societies prior to the rise of trade unions and industrial factories. Weinbren reports that by the end of the 19th century, over 80% of British working age men and 90% of Australian working age men were members of one or more Friendly Society. From the mid-nineteenth century, mutual organisations embraced these ideas in economic enterprises, firstly among tradespeople, and later in cooperative stores, educational institutes, financial institutions and industrial enterprises. The common thread (enacted in different ways, and subject to the constraints of various systems of national law) is the principle that an enterprise or association should be owned and controlled by the people it serves, and share any surpluses on the basis of each member's cooperative contribution (as a producer, labourer or consumer) rather than their capacity to invest financial capital. The International Cooperative Alliance was the first international association formed (1895) by the cooperative movement. It includes the World Council of Credit Unions. The International Cooperative Alliance was founded in London on 19 August 1895 during the 1st Cooperative Congress. In attendance were delegates from cooperatives from Argentina, Australia, Belgium, England, Denmark, France, Germany, Holland, India, Italy, Switzerland, Serbia, and the US. A second organization formed later in Germany: the International Raiffeisen Union. In the United States, the National Cooperative Business Association (NCBA CLUSA; the abbreviation of the organization retains the initials of its former name, Cooperative League of the USA) serves as the sector's oldest national membership association. It is dedicated to ensuring that cooperative businesses have the same opportunities as other businesses operating in the country and that consumers have access to cooperatives in the marketplace. In 1945 Artturi Ilmari Virtanen received the Nobel Prize in Chemistry for his invention of the AIV silage. This invention improved milk production and created a method of preserving butter, the AIV salt, which led to increased Finnish butter exports. He had started his career in chemistry in Valio, a cooperative of dairy farmers in which he headed the research department for 50 years and where all his major inventions were first put to practice. Cooperative banks were first to adopt online banking. Stanford Federal Credit Union was the first financial institution to offer online internet banking services to all of its members in October 1994. In 1996 OP Financial Group, also a cooperative bank, became the second online bank in the world and the first in Europe. By 2004 a new association focused on worker co-ops was founded, the United States Federation of Worker Cooperatives. The cooperative movement has been fueled globally by ideas of economic democracy. In an economic democracy, decision-making power is expanded from a small minority of corporate shareholders to a large majority of public stakeholders. An early vision of an economic democracy was the co-operative commonwealth, publicized by Laurence Gronlund in the late 1800s. Reformers ascribe to different approaches to thinking about and building an economic democracy. Anarchists are committed to libertarian socialism and have focused on local organization, including locally managed cooperatives, linked through confederations of unions, cooperatives and communities. Marxists, who as socialists have likewise held and worked for the goal of democratizing productive and reproductive relationships, often emphasized reforming the larger scales of human organization. They viewed the capitalist class to be politically, militarily and culturally mobilized for the purpose of maintaining power over an exploitable working class, so they fought in the early 20th century to appropriate from the capitalist class the society's collective political capacity in the form of the state. Though they regard the state as an unnecessarily oppressive institution, Marxists considered the appropriation of national and international-scale capitalist institutions, resources and the state itself to be an important first step in creating conditions favorable to solidaristic economies. With the declining influence of the USSR after the 1960s, a variety of socialist strategies emerged. So far, economic democratizers have not fundamentally challenged the hegemony of global neoliberal capitalism.

Coop principles and values

Many cooperatives follow the seven Rochdale Principles:

Voluntary and open membership Democratic member control, with each member having one vote. Economic participation by members Autonomy and independence Education, training and information Cooperation among cooperatives Concern for community

Coop Marque and domain

Since 2002, ICA cooperatives and WOCCU credit unions could be distinguished by use of a .coop domain. In 2014, ICA introduced the Global Cooperative Marque for use by ICAs Cooperative members and by WOCCU's Credit Union members so they can be further identified by their coop ethical consumerism label. The marque is used today by thousands of cooperatives in more than a hundred countries. The .coop domain and Co-operative Marque were designed as a new symbol of the global cooperative movement and its collective identity in the digital age. The Co-operative Marque and domain is reserved just for co-operatives, credit unions and organisations that support co-operatives; is distinguished by its ethical badge that subscribes to the seven ICA Cooperative Principles and Co-op Values. Co-ops can be identified on the Internet through the use of the .coop suffix of internet addresses. Organizations using .coop domain names must adhere to the basic co-op values.

Cooperatives as legal entities

A cooperative is a legal entity owned and democratically controlled by its members. Members often have a close association with the enterprise as producers or consumers of its products or services, or as its employees. The legal entities have a range of social characteristics. Membership is open, meaning that anyone who satisfies certain non-discriminatory conditions may join. Economic benefits are distributed proportionally to each member's level of participation in the cooperative, for instance, by a dividend on sales or purchases, rather than according to capital invested. Cooperatives may be classified as either worker, consumer, producer, purchasing or housing cooperatives. They are distinguished from other forms of incorporation in that profit-making or economic stability are balanced by the interests of the community. There are specific forms of incorporation for cooperatives in some countries, for example Finland and Australia. Cooperatives may take the form of companies limited by shares or by guarantee, partnerships or unincorporated associations. In the UK they may also use the industrial and provident society structure. In the US, cooperatives are often organized as non-capital stock corporations under state-specific cooperative laws. Cooperatives often share their earnings with the membership as dividends, which are divided among the members according to their participation in the enterprise, such as patronage, instead of according to the value of their capital shareholdings (as is done by a joint stock company).

Cooperative share capital

The cooperative share capital or co-operative share capital (in short cooperative capital or co-operative capital) is the form of capital that the cooperative accumulates from the paid participation shares of its members. The total amount of participation shares the paid to the cooperative constitutes the cooperative capital. The co-operative share capital is usually non-withdrawable and indivisible to the cooperative members.

Types of cooperatives

The top 300 largest cooperatives were listed in 2007 by the International Cooperative Alliance. 80% were involved in either agriculture, finance, or retail and more than half were in the United States, Italy, or France.

Consumer cooperative

A consumer cooperative is a business owned by its customers. Members vote on major decisions and elect the board of directors from among their own number. The first of these was set up in 1844 in the North-West of England by 28 weavers who wanted to sell food at a lower price than the local shops.

Retail cooperative

Retail cooperatives are retailers, such as grocery stores, owned by their customers. They should not be confused with retailers' cooperatives, whose members are retailers rather than consumers. In Singapore, Italy, and Finland, the company with the largest market share in the grocery store sector is a consumer owned cooperative. In Switzerland, both the largest and the second largest retailer are consumer owned cooperatives.

Housing cooperative

A housing cooperative is a legal mechanism for ownership of housing where residents either own shares (share capital co-op) reflecting their equity in the cooperative's real estate or have membership and occupancy rights in a not-for-profit cooperative (non-share capital co-op), and they underwrite their housing through paying subscriptions or rent. Housing cooperatives come in three basic equity structures

In market-rate housing cooperatives, members may sell their shares in the cooperative whenever they like for whatever price the market will bear, much like any other residential property. Market-rate co-ops are very common in New York City. Limited equity housing cooperatives, which are often used by affordable housing developers, allow members to own some equity in their home, but limit the sale price of their membership share to that which they paid. Group equity or zero-equity housing cooperatives do not allow members to own equity in their residences and often have rental agreements well below market rates. Members of a building cooperative (in Britain known as a self-build housing cooperative) pool resources to build housing, normally using a high proportion of their own labor. When the building is finished, each member is the sole owner of a homestead, and the cooperative may be dissolved. This collective effort was at the origin of many of Britain's building societies, which however, developed into "permanent" mutual savings and loan organisations, a term which persisted in some of their names (such as the former Leeds Permanent). Nowadays such self-building may be financed using a step-by-step mortgage which is released in stages as the building is completed. The term may also refer to worker cooperatives in the building trade.

Utility cooperative

A utility cooperative is a type of consumer cooperative that is tasked with the delivery of a public utility such as electricity, water or telecommunications services to its members. Profits are either reinvested into infrastructure or distributed to members in the form of "patronage" or "capital credits", which are essentially dividends paid on a member's investment into the cooperative. In the United States, many cooperatives were formed to provide rural electrical and telephone service as part of the New Deal. See Rural Utilities Service. In the case of electricity, cooperatives are generally either generation and transmission (G&T) co-ops that create and send power via the transmission grid or local distribution co-ops that gather electricity from a variety of sources and send it along to homes and businesses. In Tanzania, it has been proven that the cooperative method is helpful in water distribution. When the people are involved with their own water, they care more because the quality of their work has a direct effect on the quality of their water.

Credit unions, cooperative banking and cooperative insurance

Credit unions are cooperative financial institutions owned and controlled by their members. Credit unions provide to its members the same services as banks but are considered not-for-profit organizations and adhere to cooperative principles. Credit unions originated in mid-19th-century Germany through the efforts of pioneers Franz Herman Schulze'Delitzsch and Friedrich Wilhelm Raiffeisen. The concept of financial cooperatives crossed the Atlantic at the turn of the 20th century, when the caisse populaire movement was started by Alphonse Desjardins in Quebec, Canada. In 1900, from his home in Lévis, he opened North America's first credit union, marking the beginning of the Mouvement Desjardins. Eight years later, Desjardins provided guidance for the first credit union in the US, where there are about 7,950 active status federally insured credit unions, with almost 90 million members and more than $679 billion on deposit. Financial cooperatives hold a significant market share in Europe and Latin America, as well as a few countries in Sub-Saharan Africa. They also have a strong presence in Asia, Australia, and the United States. According to the World Council of Credit Unions (WOCCU), there were 68,882 financial cooperatives in 109 countries in 2016, serving more than 235 million members, with total assets exceeding 1.7 trillion dollars. The WOCCU's data do not include some major financial cooperative networks in Europe, such as Germany, Finland, France, Denmark, and Italy. In many high-income economies, financial cooperatives hold significant market shares of the banking sector. According to the European Association of Cooperative Banks, the market share of cooperative banks in the Small and Medium Enterprises (SMEs) credit market by the end of 2016 was 37% in Finland, 45% in France, 33% in Germany, 43% in the Netherlands, and 22% in Canada. In Germany, Volksbanken-Raiffeisen banks have a market share of approximately 21% of domestic credit and domestic deposits. In the Netherlands, Rabobank holds 34% of deposits, and in France cooperative banks (Crédit Agricole, Crédit Mutuel and BPCE Group) possess more than 59% of domestic credit and 61% of domestic deposits. In Finland, OP financial group holds 35% and 38% of domestic credit and deposits, respectively, and in Canada, Desjardins holds around 42% of domestic deposits and 22% of domestic credit. There are many types of cooperative financial institutions with different names across the world, including financial cooperatives ('cooperativa financiera' is the Spanish term used in Latin America), cooperative banks, credit unions, and savings and credit cooperatives ('cooperativa de ahorro y crédito' in Spanish or 'coopérative d'épargne et de credit' in French-speaking countries). Cooperative banking networks, which were nationalized in Eastern Europe, continued as cooperative institutions. In Poland, the SKOK (Spółdzielcze Kasy Oszczędnościowo-Kredytowe) network grew to serve over 1 million members via 13,000 branches, and was larger than the country's largest conventional bank. In the Scandinavia, there is a clear distinction between mutual savings banks (Sparbank) and true credit unions (Andelsbank). The oldest cooperative banks in Europe, based on the ideas of Friedrich Raiffeisen, are joined in the 'Urgenossen'.